Page 425 - Invited Paper Session (IPS) - Volume 2

IPS307 Tjeerd Jellema et al.
countries that have concentrations of SPEs they may dominate the balance of
payments financial account and the international investment position.
The paper is structured as follows. In a first section the paper reviews the
characteristics of SPEs as captured by the IMF BOPCOM definition, and
touches on the different types of entities that can be observed. The paper then
explores the European dimension as regards SPEs, and explores some of the
characteristics of the countries that are favourable to the establishment of
SPEs and SPE like entities. Subsequently the paper then addresses the
relevance of SPEs for euro area macro-economic statistics, notably the balance
of payments / IIP, but also the financial accounts. Finally the paper concludes
and describes the European current data collection effort.

2. Elements of the definition
The 2018 BOPCOM discussed and approved the definition of SPEs
proposed by the IMF TF-SPE final report [IMF 2018], reproduced below. We
briefly review these criteria, and qualify how these criteria should best be used.
One aspect of the BOPCOM definition that should be mentioned is that it
targets external sector statistics (ESS) explicitly, and thus that some of the
criteria provided would be in need to be reviewed in the broader context of
national accounts. In several aspects the definition breaks new grounds. First,
in determining what SPEs are in the context of ESS all of the criteria in the
definition need to be met. Thus the definition is necessarily more restrictive
than the current looser formulations in BPM6 and SNA2008 that allowed
compilers much more freedom to adjust to local circumstances, causing lack
of comparability across countries.

IMF TF-SPE definition:

 An SPE resident in an economy, is a formally registered and/or incorporated
legal entity recognized as an institutional unit, with no or little employment
up to a maximum of five employees, no or little physical presence, and no
or little physical production in the host economy.
 SPEs are directly or indirectly controlled by non-residents.
 SPEs are established to obtain specific advantages provided by the host
jurisdiction with an objective to (i) grant its owner(s) access to capital
markets or sophisticated financial services; and/or (ii) isolate owner(s) from
financial risks; and/or (iii)reduce regulatory and tax burden; and/or
(iv)safeguard confidentiality of their transactions and owner(s).
 SPEs transact almost entirely with non-residents and a large part of their
financial balance sheet typically consists of cross-border claims and
liabilities.

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